SEC Expresses Several Concerns About Cryptocurrencies
U.S. Securities & Exchange Commission (SEC) chairman Jay Clayton believes that “more enforcement actions” will have to be taken, because of the activities of certain cryptocurrency traders and investors. Meanwhile, Stephanie Avakian, co-director of SEC’s Enforcement Division, stated that several crypto-related investigations were already underway. Both Clayton and Avakian issued their statements while attending the “SEC Speaks” Conference, held on February 23rd, 2018. Notably, a few other prominent SEC officials expressed concerns regarding the use of digital currencies during the two-day conference.
This is definitely not the first time that SEC’s top officials have provided detailed statements regarding cryptocurrencies. A few weeks ago, as Core Media reported, Clayton testified before the Senate Banking Committee regarding how American regulators had been monitoring the crypto-market. Moreover, the SEC head mentioned that crypto-startups and ICOs had not been providing proper disclosure information to investors. Other concerns noted by Clayton were the presence of fraudulent schemes, cyber criminals, market manipulation, and the extremely volatile nature of cryptocurrencies.
SEC’s Probe Into Crypto-Related Businesses Deepens
In addition, the SEC has pointed out that ICOs are essentially securities offerings, and should be registered as such. However, up till now, Clayton says that ICOs have not registered with U.S. regulators. Due to these issues, Robert Cohen, head of SEC’s cyber unit enforcement division, stated that his department has increasingly been looking into crypto-related cases since the last few months.
Cohen added that the cyber unit division has been focusing their investigation process on fraudulent business activities related to cryptocurrencies by having its representatives directly contact companies offering ICOs. As a result of these efforts, the SEC chair says that the business operations of several crypto-related ventures have been suspended.
A Methodical Crackdown On The Crypto Industry
Dalia Blass, SEC’s Division Director of Investment Management, has also joined the regulator’s extensive probe into the digital currency market. The highly experienced lawyer said that one of her top priorities is to effectively monitor the use of cryptocurrencies. In order to properly regulate the crypto-market, Blass and other federal regulators have noted that they will be taking a “do no harm” approach. It appears that their goal is to crack down on the unlawful activities in the cryptosphere, while not getting in the way of legitimate crypto-related businesses.
The SEC seems to have performed careful and thorough research on the digital currency market, based on several statements issued by its members. For instance, it has clarified its stance on several issues related to cryptocurrency trading and investment. Per the federal regulator:
“[it] has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies…trading may occur on…platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators such as the SEC may not be able to effectively pursue bad actors or recover funds“.
In other words, American regulators have made it clear that, ultimately, the investor is responsible for his/her investment decisions.
Keeping Up With Globalization
Whether we’re ready or not, globalization has made it very difficult for authorities around the world to monitor cross-border transactions. Depending on which jurisdiction and geographic location a transaction is conducted, there are different laws that are applicable. This complicates matters even more when it’s unclear where exactly a particular business activity took place.
When dealing with cryptocurrencies, the way they’re defined by governments across the globe is quite different. While Russia considers them to be “financial digital assets”, the SEC considers cryptos to be more like fiat currencies. According to Clayton, his agency:
“has a sharp focus on how U.S. dollar, euro, and Japanese yen transactions affect our securities markets…we [also] have the same interests and responsibilities with respect to cryptocurrencies. The technology on which [they] are based may prove to be disruptive, transformative and efficiency-enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike“.
These are definitely some encouraging words regarding digital currencies, coming from a top-level government authority. There also seems to be some consistency in the actions and words of American lawmakers. For example, U.S. authorities, particularly Republicans, appear to have become increasingly accepting of cryptocurrencies. As Core Media reported, Georgia, Arizona, and several other U.S. states have proposed legislation which has requested that cryptocurrencies should become an accepted form of payment for state taxes and licenses. Clearly, these are all signs that digital currencies might be headed for mainstream adoption.